Israel is considering plans to build an artificial island off the coast of the Gaza Strip to house a sea and airport, and encourage tourism in the area.

Yisrael Katz, the Israeli minister for transport, said the plan had been under consideration for many months and had been encouraged by Binyamin Netanyahu, the Israeli prime minister. He said it would also relieve Israel of the obligation to be the transit point for goods into the enclave.

The Gaza Strip has no sea port and its airport was destroyed. The area is the sixth most crowded place in the world. Since 2007, Israel, which controls the majority of Gaza's borders has only allowed limited kinds of goods into Gaza and allowed very few exports out. Gazans have got round restrictions by smuggling goods from Egypt through tunnels.

Katz said he expected the island would be under international control for at least 100 years to ensure Israel's security. "We have built models and there are many entrepreneurs who are interested and prepared to invest billions and make money," he told Israel Army Radio

A spokesman for the Israeli ministry of transport said the main aim of the plan was to improve the quality of life for Palestinians in Gaza while ensuring Israel's security. "The island would be three square miles and it would be linked to Gaza with a three mile-long bridge which could take vehicles, trains and pipes for oil and gas. The island would have hotels, tourist areas, a marina with yachts and an airport and a seaport."

He estimated that the project would cost up to $10bn (£6.2bn), create 100,000 jobs and take up to 10 years to complete.

Environmentalists and Palestinian officials, however, described the venture as "fantasy" and "madness", and accused the minister of political opportunism.

A spokesman for the Israeli Ministry of Environmental Protection said they had not been consulted about the project. Previous plans for a deepwater port in the Gaza Strip have stalled, partly because of Israel's security concerns, but also because any developments could cause massive damage to the whole coast of Israel.

Gidon Bromberg, director of Friends of the Earth Middle East, described the project as "complete madness".

"This sort of thing makes no sense whatsoever," he said. "The environmental implications would be felt along the coast of Gaza and Israel. Even the building of a marina caused a two-mile scar of beach erosion in Israel which the developer's planning had not predicted. The public should be very sceptical."

Ghassan Khatib, spokesman for the Palestinian Authority, said that if Israel wanted to improve the lives of Palestinians there were lots of simpler measures they could take. "This is pure fantasy and it is not the concern of Israel. If they want to help Palestinians, they must end the siege on Gaza, and allow the reintegration of the West Bank and Gaza and the establishment of a Palestinian state. Then they are welcome to make proposals."